Have you ever heard about the first right issues?
This is how you can avoid paying double capital gains tax!
If you are considering selling shares in US companies it is important for you to know:
In accordance with the tax treaty between Israel and the U.S, the first right to tax on capital gains from the sale of securities – belongs to Israel (if the seller owns less than 10% of the company’s shares).
Therefore, an Israeli resident who is also required to file a US tax return, (by virtue of his American citizenship), will first pay the tax on capital gains in Israel and the balance (if applicable) to the U.S tax authorities.
Investor’s accountants, both in Israel and in the US, must take into account who has first right to taxation:
– The first right to taxation on interest and dividends from American securities is to the U.S
– The first right to taxation on capital gains from the sale of American securities is to Israel.
Be aware to not pay tax voluntarily to the U.S., and offset the tax due with the amount of tax already paid in Israel.